Indian Bond Yields Rise 7 Basis Points Amid Crude Price Concerns, Market Awaits RBI Intervention

Indian Bond Market Update

March 23, 2024

The Indian bond market experienced a decline of 7 basis points due to concerns over elevated oil prices and potential inflationary pressures. The ongoing war in West Asia has led to a surge in Brent crude prices, which have risen by approximately 50% since late February, hitting $112 per barrel.

The benchmark 10-year bond yield has reached 6.8027%, a 0.0658 percentage point increase from its previous value of 6.7369%. Bond prices and yields exhibit an inverse relationship. The escalation of the war in West Asia, with Iran threatening to strike the energy and water systems of its Gulf neighbors, has heightened concerns over inflationary pressures.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Domestically, the state governments are set to conduct a debt sale of Rs 57,408 crore on Tuesday. This exceeds the Rs 1 lakh crore that the Reserve Bank of India (RBI) aims to infuse into the liquidity system through an overnight Variable Rate Repo (VRR) auction later in the day. The RBI has already conducted 2 such VRR operations last week.